Break-EvenBE
Break-even is the price at which a trade neither makes nor loses money once all costs are included; moving a stop to break-even means exiting there if the price returns.
Break-even is the point where a trade stops being a loss. It is higher than your entry price for a long trade, because costs have to be covered first. Traders also use the word for two related ideas: moving a stop to break-even to make a trade “risk-free”, and the break-even win rate a strategy needs to stop losing money. This entry covers all three.
- Category
- Trading Basics
- Reading time
- 4 min
- Also called
- Breakeven, Break-even price, Break-even point
- Updated
Break-even in plain words
If you buy at $50 and pay $0.10 per share in total costs, the price has to reach $50.10 before you are actually at zero.1 That is your break-even price.
Moving your stop to break-even means that if the trade turns against you, you exit at roughly zero instead of at a loss. See Stop Loss.
How to work out break-even, step by step
Add up costs per unit
Commissions, spread and fees for entry and exit, divided by quantity. See Trading Fees and Commissions.
Long trades
Break-even = entry + costs per unit.
Short trades
Break-even = entry − costs per unit (include borrowing fees).
For options
Call: strike + premium. Put: strike − premium. See Options.
Decide on stop rules
Choose when, if ever, to move a stop to break-even.
Worked examples
Example 1 — Break-even price with costs
CalculationBuy 400 shares at $12.00. Total round-trip costs $16.
| Costs per share | $16 ÷ 400 = $0.04 |
| Break-even price | $12.04 |
Selling at your entry price is a small loss once costs are counted.
Example 2 — Break-even win rate
StrategyA strategy wins $300 on winners and loses $150 on losers (2 : 1).
| Break-even win rate | 1 ÷ (1 + 2) ≈ 33% |
With 2 : 1 rewards, winning more than about a third of trades is profitable (before costs). See Risk-to-Reward Ratio.
Example 3 — Stop moved too early
Too earlyA trader moves the stop to break-even after a small move. Normal noise takes the price back, the trade exits at zero, and then rallies to the original target.
| Exit | ≈ $0 |
| Missed profit | Full target |
Moving to break-even too soon swaps small losses for many missed winners.
The three meanings of break-even
| Aspect | Formula | Used for |
|---|---|---|
| Break-even price | Entry ± costs per unit | Knowing when a trade is truly profitable |
| Stop to break-even | Stop moved to entry (plus costs) | Removing initial risk |
| Break-even win rate | 1 ÷ (1 + reward : risk) | Judging a strategy |
| Option break-even | Strike ± premium | Profit point at expiry |
Why break-even matters
Realistic targets
Targets must clear costs first.
Trade management
Locking in a no-loss exit at the right time. See Trade Management.
Strategy testing
Comparing win rate with the break-even rate. See Expectancy.
Options
Knowing how far the price must move to profit.
Advantages and disadvantages
Advantages
- Shows the real profit point after costs.
- Moving stops to break-even can remove risk.
- Break-even win rate gives a quick strategy check.
Disadvantages
- Moving stops too early cuts winners short.
- Gaps can still fill stops below break-even.
- Easy to forget costs in the calculation.
- A break-even exit is not free: time and opportunity are used.
Going deeper
Read as far as you need. Each level builds on the one before it.
Costs raise the bar
Beginner
The higher your costs, the further the price must move before you profit. Frequent small trades are hit hardest.
When to move to break-even
Intermediate
Many traders wait until price has moved at least one full risk unit (1R) or a structural level has formed before moving the stop. See R-Multiple.
Break-even and expectancy
Advanced
Moving stops to break-even changes the distribution of results: fewer full losses, more zero results and fewer full winners. Backtest the rule rather than assuming it helps. See Backtesting.
Common mistakes
Ignoring costs
Break-even is above entry for longs.
Moving the stop too soon
Give the trade room to breathe.
Treating break-even as guaranteed
Gaps can skip the stop.
Confusing win rate with profitability
Compare it with the break-even rate.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Break-even price = entry plus (long) or minus (short) costs per unit.
- Moving a stop to break-even removes initial risk but can cut winners.
- Break-even win rate = 1 ÷ (1 + reward-to-risk).
- Option break-even is strike plus or minus premium.
- Gaps can still produce losses beyond break-even.
Frequently asked questions
Should I always move my stop to break-even?
Why is my break-even above my entry price?
What is the break-even win rate for a 1 : 1 strategy?
Further learning
- Risk-to-Reward Ratio
What sets the break-even win rate.
- Trailing Stop
Another way to protect open profit.
- Profit and Loss
Calculating results after costs.
- Expectancy
Whether a strategy makes money overall.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- Investor.gov (SEC). Commissions (glossary) (opens in a new tab) Checked .
- CME Group. The Mathematics of Trading Success (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.